Like banking and insurance, technology has also transformed how one invests in mutual funds. A host of digital investment platforms now offer simple, paperless and zero-fee direct investments in mutual funds through their website and app. These platforms also leverage technology and data analytics to provide goal-based investments for their clients. No wonder these are a hit with the young generation of investors, mostly in their early 30s who want to invest their surplus incomes to meet their financial goals. “Our demographic age group target is from 27–35 who belong to the salaried class. 50 per cent of our customers belong to the top eight cities while the remaining 50 per cent come from a long tail of 800 cities”, says Subramanya S V , Founder of Fisdom, a mutual fund investment app.
At FinEdge, yet another similar platform, a large majority of their clients are those who invest between Rs15,000–25,000 a month towards their important financial goals. There are certain clients who start their investments with as little as Rs.1,000 a month while some invest up to Rs.10 lakh a month. “Our target user base is what we call ‘rich millennials’ - users in age group of 25 to 35 with investable income. That includes users who want to give mutual funds a try with very small amounts”, says Lalit Keshre, Co-founder and CEO, Groww.
While some of these are dedicated mutual fund investing platforms, others provide comprehensive financial services that include mutual fund investments. Here are a few salient features of these platforms.
Paperless investing
One of the key strengths of these platforms is making the entry process easy, paperless and hassle free. The Know Your Customer ( KYC) process has been one of the most cumbersome steps in mutual fund investing. “Initially, it was a physical application with investor details and supporting documents. Subsequently, an in-person verification or IPV was made mandatory,” says Subramanya. This would involve the tedious task of collecting the physical KYC forms. “We built a seamless and guided online process on the app where the customer is asked to upload a series of documents such as address proof, identity proof, cancellend cheque and personal photograph. The customer can digitally sign on the app and can also record and upload an IPV video from inside the app”, he adds.
Customers who have invested in mutual funds do not need to go through the KYC process again as they have already registered with the central KYC database. “For a first-time investor, we perform e-KYC,which is an Aadhaar-based KYC facility that requires nothing more than a mobile-linked Aadhaar number to complete the KYC. If a person wants to do non-Aadhaar-based KYC, there will be a one-time paperwork that will be involved to complete the process”, says Srikanth Meenakshi, Founder and COO, FundsIndia.
Technology at play
These mutual fund platforms leverage technology to offer customised and relevant investment opportunities to its clients. At Sqrrl, the technology involves using large data sets that the computer algorithm can repeatedly go through connecting the input data (e.g., credit history, assets, purchasing history etc) with the desired output (the correct identification of a suitable investment portfolio). “Our proprietary model scans through over 4,000 mutual fund schemes and suggests the best fund to meet an investor’s goal. Deep learning, Artificial Intelligence (AI) and data intelligence, and experience of Sqrrl’s team of financial experts allow us to monitor the risk profile of the investor, suggest the most relevant funds based on their goal, investment duration and other factors to help them get to their goals at the fastest”, says Samant Sikka, co-founder, Sqrrl.
Mumbai-based investment app, Clearfunds uses a big data algorithm, which mines through over 18 million data points to build a predictive model that optimizes for two-year returns. “These fund recommendations are available to all our customers and are included in our risk-based portfolios too”, says Kunal Bajaj, Founder and CEO of Clearfunds. Technology is used to align the fund portfolio according to the requirement of the customer. “Our DIY platform runs multiple algorithms to ensure that the fund selection is specific in nature and aligned to the clients’ risk profile, tenor and goals. We are also shortly launching our “smart” chatbot to further leverage on AI and machine learning and to further enhance our proposition”, says says Harsh Gahlaut, CEO, FinEdge.
On many instances, it becomes difficult for the user to decide on the goals and other priorities. This is where technology comes in. “We study the patterns and trends and identify the right milestones and strategies of investment. Multi -layered portfolios provide a solution based on the risk an individual takes along with considering the tenure and amount to be invested”, says Dinesh Rohira, Founder and CEO, 5nance.com.
The human touch
Even as these platforms provide robo-advisory solutions to its clients, most of them have a dual model where human expertise is also on offer. “At FinEdge, we believe that human interaction is critical when it comes to managing relationships”, says Gahlaut. Clients are engaged with relationship managers at regular intervals, time is spent in understanding the client’s requirements and current situation better, be empathetic and to be accessible. “These aspects cannot be replaced with technology”, he adds.
Customers prefer having the option of getting advice from experts as they have always been used to. “We have a robust and full-fledged advisory team (backed by our own internal research) that engages with the customers and provides them advice. This human service complements our robo-advisory offering. We understand that not all customers are comfortable with taking advice from a system”, says Meenakshi. 5nanace.com has a team have a team of advisors who are available to assist the users throughout the journey and for ongoing advisory. “Users can reach us through chat, email and calling facilities available on the web and app”, says Rohira.
Education and awareness:
These mutual fund platforms also leverage several online channels and means to educate their customers and empower them with knowledge regarding investing in mutual funds. This helps an investor become more confident when making investment decisions.
FundsIndia offers blogs, YouTube videos and regular email connects with their customers. They also have monthly newsletters, weekly portfolio updates, and a separate knowledge advisory sent on a weekly basis. Apart from these, they also have a Twitter handle and a very active Facebook group dedicated to investors where they provide support services including advisory. They also host Quora sessions occasionally on investment topics.
Sqrrl’s website has a dedicated blog on personal finance which gets promoted across digital channels. The blogs provide relevant information for both beginners and experienced investors alike, and are presented in a manner that is easy to comprehend. “We also make use of digital video platforms like YouTube and Vimeo where we upload product demos and answers to the most common customer queries to ensure that all this information is available to our users at the click of a button”, says Sikka.
Reduced costs
Another plus point of these mutual fund platforms is that, costs of investments are lower than traditional modes of investment. And these platforms earn mostly from distribution fees which they receive from mutual fund companies. There is no account opening charges, transaction or maintenance fees. “The cost to the customer in all honesty is just our marginal distribution fees that we receive from the AMCs which is a part of the total expense ratio. Apart from that we do not charge the customer any upfront money”, confirms Subramanya. FinEdge and FundsIndia too earn its revenues through the income they receive from asset management companies. These platforms thus, do not charge investors any up- front money or any fees for advisory or portfolio services.
Some of these platforms have a different business model where they do not charge commissions but have a pricing plan in place for customers. “Investing in mutual funds at Clearfunds is free—there are no commissions or hidden charges. We only charge for advice – when a customer invests in a Clearfunds portfolio. Our fees are Rs 999 per portfolio in a year”, says Bajaj. Similarly Sqrrl does not keep any commissions but they are building a model where user gets other services bundled with the subscription. Groww, which is now focused on building their product and customer base, will introduce premium advisory services in the future.
Whether you are investing regularly to meet your goals or are a first time investor, it is a good idea to explore these investment platforms to make your mutual fund investments easier, convenient and effective.
anaghpal@outlookindia.com